A Scholarly yet Entertaining Discussion of PTO vs. Traditional Vacation and Sick Plans. Presented by Lauraine Bifulco

Transcription

1 A Scholarly yet Entertaining Discussion of PTO vs. Traditional Vacation and Sick Plans. Presented by Lauraine Bifulco

2 Introduction Hot topic in HR and legal circles. Some experts are saying, PTO is the way to go! Paid Sick Leave now mandated in 7 states and 32 cities/counties across U.S. Does this change things? Let s go back to the beginning...

3 Paid Time Off Benefits Until recently, not required by federal or state law at discretion of employer. Once offered, plans do fall under legal regulation by state labor commissioners. Intended to provide work/life balance. Almost now expected by employees.

4 Traditional Vacation Not yet required by law Typically for employee s leisure. Can include personal business. U.S. employers offer 10 days (80 hours). Allowance increases with tenure. No reason required. For full-time employees.

5 Traditional Sick Leave Historically For employee s illness. Can include illness of family member. U.S. employers offer 5 days (40 hours). Fixed annual amount. May require medical note. For full time employees. Now: Required 7 states/ 32 cities/counties

6 Siiiick! I m Getting Paid Today?

7 The History Connecticut was the first state 2012 Some cities much earlier SF 2007; DC 2008 Federal legislation first proposed 2005 Obama s proposal 1 hr/30 worked up to 56 in year, for ERs with 15+ EEs Urged states and cities to adopt legislation As of states, 32 cities/counties 1/1/17 Executive Order requiring contractors to provide paid sick days starting in 2017 Proposed federal legislation that would create standard and replace local ordinances

8 Current Paid Sick Days Laws Effective 1/1/18 Map Source: National Partnership for Women & Families tnership.org/ Effective 7/1/17 State with active campaign State with existing law City with existing law

9 States that Prohibit Local Sick Leave Laws as of June, 2016 Map Source: Towers Watson on.com/en- US/Insights/Newsletters/ Americas/insider/2016/06 /vermont-becomes-fifthstate-to-enact-paid-sickleave-law

10 The States Jurisdiction Effective Date Accrual Begins New Hire Waiting Period for Use Accrual Rate Yearly Accrued Time Cap California 7/1/2015 Upon hire 90 days 1 hr / 30 worked or 24 hrs/3 days lump sum 24 hrs usage / 48 hrs accrual Connecticut 1/1/2012 Upon hire 680 working hours 1 hr / 40 worked 40 hrs Massachusetts 1/1/2015 Upon hire 90 days 1 hr / 30 worked 40 hrs Unpaid if 10 or fewer EEs Oregon 1/1/2016 Upon hire 90 days 1 hr / 30 worked 40 hrs usage / 80 hrs accrual Unpaid if 10 or fewer EEs Vermont 1/1/2017, 2018 Upon hire Up to 1 year 1 hr / 52 worked hrs hrs Arizona 7/1/17 Upon hire 90 days 1 hr / 30 worked Washington 1/1/18 Upon hire 90 days 1 hr / 40 worked 15+ EEs 40 hrs. Fewer 15 EEs 24 hrs. No annual cap, Carryover can be limited to 40 hrs

11 NOTES 1 Methodologies differ 6 Fewer than 15, 15+ EEs 2 Fewer than 25, 25 to 99, 100+ EEs 7 5 to 49, 50 to249 EEs, 250+ EEs Fewer than 5 EEs, 32 hrs paid, 24 hrs 3 unpaid 8 Fewer than 10, 10+ EEs 4 Fewer than 5 EEs, unpaid 9 5 or fewer EEs, unpaid 5 Fewer than 10 EEs, unpaid 10 Few than 6 EEs, unpaid The Cities Jurisdiction Effective Date Accrual Begins New Hire Waiting Period for Use Accrual Rate Yearly Accrued Time Cap 1 Washington 2 DC 11/13/2008 Upon hire 90 days 1 hr / 87 / 43 / 37 worked 24 / 40 / 56 hours Montgomery County 3 MD 10/1/2016 Upon hire 90 days 1 hr / 30 worked 56 hours New York City 4 NY 4/1/2014 Upon hire 120 days 1 hr / 30 worked 40 hours Philadelphia 5 PA 5/13/2015 Upon hire 90 days 1 hr / 40 worked 40 hours Pittsburgh 6 PA 90 days after regs Upon hire 90 days 1 hr / 35 worked 24 / 40 hours Tacoma WA 2/1/2016 Upon hire 180 days 1 hr / 40 worked 24 hours Seattle 7 WA 9/1/2012 Upon hire 180 days 1 hr / 40 / 40/ 30 worked 40 / 56 / 72 hours Spokane 8 WA 1/1/2017 Upon hire 90 days 1 hr / 30 worked 24 / 40 hours Minneapolis 9 MN 7/1/2017 Upon hire 90 days 1 hr / 30 worked 48 hours Portland 10 OR 1/1/2014 Upon hire 90 days 1 hr / 30 worked 40 hours Cook County & Chicago IL 7/1/2017 Upon hire 180 days 1 hr / 40 worked 40 hours St. Paul MN 24+ 7/1/2017 Fewer 1/1/2018 Upon hire 90 days 1 hr / 30 worked 48 hours

12 California NOTES 1 Methodologies differ 4 55 or fewer, 56+ EEs 2 Fewer than 10 EEs, 10+ EEs 5 25 or fewer EEs, 26+ EEs 3 Fewer than 10 EEs, 10+ EEs 6 Fewer than 25 EEs, 25+ EEs Jurisdiction Effective Date Accrual Begins New Hire Waiting Period for Use Accrual Rate Yearly Accrued Time Cap 1 San Francisco 2 2/5/ days after hire none 1 hr / 30 worked 40 / 72 hours Oakland 3 3/2/2015 Upon hire 90 days 1 hr / 30 worked 40 / 72 hours Emeryville 4 7/1/2015 Upon hire 90 days 1 hr / 30 worked 48 hrs / 72 hours Los Angeles 7/1/2016 Upon hire 90 days 1 hr / 30 worked 48 hours Santa Monica 5 1/1/2017 Upon hire 90 days 1 hr / 30 worked / 40 hours / 72 hours San Diego 7/11/2016 Upon hire 90 days 1 hr / 30 worked 40 hours Berkeley 10/1/2017 Upon hire 90 days 1 hr / 30 worked 48 hrs / 72 hours

13 1 NOTES Methodologies differ or fewer, 10+ EEs 9 or fewer 24 paid / 16 unpaid, 10+ EEs 40 paid New Jersey Jurisdiction Effective Date Accrual Begins New Hire Waiting Period for Use Accrual Rate Yearly Accrued Time Cap 1 Bloomfield 2 6/1/2015 Upon hire 90 days 1 hr / 30 worked 24 / 40 hours Jersey City 3 1/1/2014 Upon hire 90 days 1 hr / 30 worked 24 / 40 hours Montclair 2 3/1/2015 Upon hire 90 days 1 hr / 30 worked 24 / 40 hours Newark 2 5/1/2014 Upon hire 90 days 1 hr / 30 worked 24 / 40 hours Trenton 2 7/1/2015 Upon hire 90 days 1 hr / 30 worked 24 / 40 hours East Orange 2 1/1/2015 Upon hire 90 days 1 hr / 30 worked 24 / 40 hours Irvington 2 1/1/2015 Upon hire 90 days 1 hr / 30 worked 24 / 40 hours Passaic 2 1/1/2015 Upon hire 90 days 1 hr / 30 worked 24 / 40 hours Patterson 2 1/1/2015 Upon hire 90 days 1 hr / 30 worked 24 / 40 hours Plainfield 2 7/1/2016 Upon hire 100 days 1 hr / 30 worked 24 / 40 hours New Brunswick 2 1/62016 Upon hire 120 days 1 hr / 35 worked 24 / 40 hours Elizabeth 2 3/2/2016 Upon hire 90 days 1 hr / 30 worked 24 / 40 hours Morristown 2 1/11/2017 Upon hire 90 days 1 hr / 30 worked 24 / 40 hours Appear quite similar; beware of significant nuances!

14 New Federal Executive Order Effective 1/1/17 All EEs on federal contracts 1 hr / 30 worked Cannot cap accrual at less than 56 hours, must carry over Not payable upon termination Reinstated for EEs rehired w/in 1 year Can use for physical/mental illness, injury, medical condition; care from healthcare provider; caring for child, parent, spouse, domestic partner or any other individual related by blood or affinity whose association with the employee is the equivalent of a relationship Also for absences due to domestic violence, sexual assault, stalking ER allowed to obtain certification for absences that > 3 consecutive days Regs by Sept Does NOT preempt but adds to state or local laws.

15 Compliance Challenges Many laws convoluted, poorly worded, ambiguous Most (not all) require offering to FT, PT, even Temp, and Seasonal Some excluded EEs and industries Many have different levels of rules based on headcount Washington DC Some of the laws require total headcount even if out of jurisdiction - Massachusetts

16 The New Wave Paid Time Off PTO Typically combines vacation, sick, and personal. Can include holiday, bereavement, civic duty, etc. More days than vacation plan, more than sick, usually less than sum. Attractive to employees.

17 PTO-What Gets Included? Bereavement Employees are unable to schedule the need. Perception of unfairness. Do you want to withhold pay? Morale issues.

18 PTO-What Gets Included? Holiday Cannot dock for absences caused by the employer or by operating requirements of business. Employee is ready and able to work. Holiday would not be day off for personal reasons unless company remains open and employee elects day off or if religious holiday for employee. Jury Duty, Witness, Military Leave Cannot dock for partial week absences. If Exempt employee has PTO available, employer can require it be used. If no PTO available, employer cannot dock. Conclusion: Best to keep these out of PTO plans

19 Scheduling: Sick Time Now must follow state and city regs. Vacation employer wants and needs advance notice. PTO is both neither is practical. Policy will need to address: Accrual method consistent with state/city Sick Leave laws. Scheduled PTO may not be able to deny time off Unscheduled or Emergency PTO How to define emergency Are you back to square one and now policing? If not offered to all employees, must have separate Sick leave policy for others. Use under LOA laws PTO - Some Unique Challenges

20 PTO The Pros Employees tend to love perceived as more vacation. A good fit for company with flexible culture. Less administrative burden one benefit to track.

21 PTO - The Cons Employees will be out more. More cumbersome to administer notice requirements. Employer may have hard time saying No to sick employee who has exhausted PTO. May cost more at time of termination. Depending upon design, may present some challenges with exempt status. Complicates decision to require use of paid leave during FMLA. Requires compliance with state vacation regulations accrual, pay out upon term, etc.

22 PTO/Vacation & Mandated Paid Sick Leave Most statues allow PTO/Vacation plan to meet Paid Sick Leave requirements as long as all aspects of law are met. Some challenges: PTO/Vacation typically accrue as flat amt. per pay period/month/year. Often need to ensure that accrual alternative methodology will meet the mandated min. accrual. PTO/Vacation often does not commence upon hire required by most sick days laws. Cannot deny PTO if used for sick. PTO/Vacation often does not apply to PT, temp OR is pro-rated for PT and could be at too low a level.

23 The Newest Wave Unlimited PTO 2004 Netflix introduced the concept. Very progressive, viewed as very forwardthinking, employee friendly. Other large Silicon Valley followed suit Virgin, HubStub, LinkedIn Netflix announced that EEs were taking an average of 3 to 5 weeks off. Netflix got a lot of press in 2014 when they also added 1 year paid maternity/paternity leave.

24 The Backlash Virgin and LA Times EE backlash rescinded their policies in early 2015 Jan 2015 prominent CA employment attorney publishes article citing numerous ways unlimited PTO violates CA labor code. Cites concern that penalties could be in 10s of thousands. 20+ states, cities, counties begin passing mandated paid sick days laws. Brings up question of how to be in compliance w/ paid sick leave if you have an unlimited vacation or PTO plan. Aug CA Labor Commissioner rules that unlimited vacation plans DO NOT meet requirements of CA paid sick leave but then months later reverses the decision and states OK as long as words unlimited appear on pay stub. Question of unlimited plans meeting legal requirements of other states/cities not clear. Not in texts of legislation. Ambiguity, potential for complaints/lawsuits.

25 Employee perception on inequity The EE who takes a lot of time off vs. the one who doesn t What happens upon termination to EE requesting pay out? What happens during a long LOA? Perhaps only for Senior/Exec management? Despite challenges, still on the rise! The Challenges

26 So What s the Right Play for Your Company? "Though this be madness, yet there is method in 't."

27 #1 Develop Your Policy Essential Elements PTO or Vacation and Sick? If PTO, what is included? Unlimited? If Keeping PTO, with separate Sick Leave, need to consider: Full-time only? If Part-time, what is allowance? Other eligibility criteria? Length of service? Decide upon accrual method and wait period. Decide caps. Establish position on cash-outs. NOTE Beware of constructive receipt issues with IRS.

28 #1 Develop Your Policy Essential Elements continued Develop notice requirements. Black-out periods? What are minimum increments for use? Same for Exempt and Non-Exempt? Are negative balances allowed? Decide upon use during FMLA/CFRA, other leaves. How to handle Exempt employees who work while on paid time off? Checking voic and on a day off. Have reviewed for compliance. Remember the Essential Elements may be impacted if using PTO to cover Sick Leave

29 #2 Develop Procedures A policy isn t enough. Create tracking system Systematize don t rely on memory or notes. Use payroll or HRMS. Make sure system is implemented in line with policy. Develop forms or other internal systems. Audit past practices. Train payroll, HR, and supervisors. Announce any changes to employees in writing and in advance.

30 Other Employer To Do s: Review entire handbook for consistency. Audit Exempt classifications. Audit docking policies.

31 Questions?

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